How to Get Out of Debt Using a Debt Snowball

With all those payments going out each month, there's nothing left for you. To get out of debt, you've got to change your habits. Create margin. Earn extra income. Live on rice and beans. You can be debt-free. We'll show you how.

1) List your debts in order from smallest total payoff balance to the largest.

Don't worry about the interest rate, unless two of the debts have a similar payoff balance. In that case, pay off the one with the highest interest rate first.

2) Get your debt snowball rolling by paying as much as you can on the smallest balance.

Only make minimum payments on all the other debts and put everything you can into the first debt. When you knock one out, cross it off. This will show you how close you are to becoming debt-free and keep you fired up!

3) Once you've paid something off, move on to the next debt on the list.

As the payments roll over, watch how fast your payoffs grow. You can be out of debt sooner than you think.

Sandy's husband had an ATV accident a few years ago. They were both in between jobs at the time and had no insurance. They still have $20,000 in medical bills to pay, in addition to $8,000 in credit card debt. Dave tells them where to start in order to clean up the mess.

Adam is going through a divorce that's about to be finalized. He has been following Dave's plan and was working on his debt snowball. Adam asks if it's okay to pause work on the debt snowball while getting back on his feet financially. Dave and his daughter Rachel Cruze both say yes.

Brandon has $55,000 in debt, including $15,000 on a car loan. He has a part-time job and is working up to 70 hours some weeks. Brandon wants to know what Dave recommends for staying motivated through this process.